Tuesday, August 25, 2009

Pensioners and Australians on benefits can hardly complain about rising prices. According to the first Pensioner and Beneficiary Living Cost Index the prices they faced climbed a barely discernible 0.1 per cent between March and June.

Employed Australians did even better. The so-called analytical indexes released with the new pensioner index yesterday show that they actually enjoyed a drop in prices of 1.1 per cent.

Which raises the question of who's actually paying the official consumer price index increase of 0.4 per cent...
The Bureau of Statistics says it calculates the living-cost indexes differently to the CPI, including direct measures of the cost of housing and insurance, both of which have been falling.

It made for a downbeat launch of the new near-zero pensioner index, promised by Labor during the election as a means of enhancing pension increases.

Families Minister Jenny Macklin said it delivered "on the government’s commitment to index pensions by a measure that best reflects pensioners’ living costs" and expressed confidence in the way it was calculated.

The index came under fire ahead of its release for understating actual price rises by winding back measured prices to compensate for improvements in the perceived quality of goods such as cars and houses.

Actual rents climbed 41 per cent at a time when the Bureau's measure increased 23 per cent and new car prices climbed 20 top 50 per cent at a time when the Bureau's measure increased 7.3 per cent.

The Bureau intends to stick with its methodology, but plans to "progressively refine" the index by more accurately surveying where pensioner and beneficiaries spend their money and pricing goods at the types of outlets they most likely to spend at.

The Pensioner and Beneficiary Index will be used to boost pensions on the occasions when it increases faster than both the consumer price index and male total average weekly earnings. Although male earnings usually increase faster than prices, in the most recent quarter they fell, raising the possibility that the new index will be used to calculate the next half-yearly pension increase due in September.

In the last six months it has increased faster than the CPI, climbing 1 per cent at a time when the CPI climbed 0.5 per cent.

The pensioners index is less stable than the consumer price index, giving a high weighting to the highly variable food prices that form a large part of pensioners' budgets.